The costs incurred when a firm buys on the marketplace what it cannot make itself are referred to as:

The correct choice, which identifies the costs incurred when a firm purchases goods or services from the marketplace instead of producing them in-house, is transaction costs. These costs encompass a variety of expenses associated with the process of finding, negotiating, and confirming the arrangement with external suppliers. This includes not only the price of the goods but also costs related to search, bargaining, and enforcement of contracts.

Transaction costs reflect the economic friction present in a marketplace, often arising from uncertainties in negotiations and the need for contracts to ensure compliance and quality of the purchased goods. As opposed to internal production, where a firm can manage costs and processes directly, purchasing externally introduces various factors that can affect overall expenditures.

The other options provide distinct definitions that don't align with the concept of purchasing inputs from outside. Switching costs pertain to the costs associated with changing suppliers or switching products, procurement refers broadly to the overall process of acquiring goods and services, and agency costs are the costs arising from conflicts of interest between stakeholders, such as between a company's management and its shareholders. Understanding transaction costs is crucial for firms, as they weigh the benefits of outsourcing versus in-house production.